Monetary Policy and Selected Deposit Money Banks Performance in Nigeria: An Impact Analysis
Abstract
This study examined the impact of monetary policy on the financial performance of Deposit Money Banks in Nigeria. The specific objective were to determine the impact of monetary policy rate on banks’ performance (RSF), evaluate the impact of interest rate on banks’ performance (RSF), and examine the impact of cash reserve ratio on banks’ performance (RSF)in Nigeria Deposit Money Banks. Ex-post facto design was adopted. The data used for this study were collected from Central Bank of Nigeria (CBN) and audited financial statements of Nigeria Deposit Money Banks covering the period 2010-2023. Data collected were analyzed using descriptive statistics, multiple regression analysis and post estimated tests. Findings revealed that the Monetary Policy Rate (MPR (? = 0.709393, p = 0.6828); Interest Rate (INR (? = 0.413183, p = 0.3826) and Cash Reserve Ratio (CRR (? = -0.040945, p = 0.9211), all have insignificant relationship with banks’ performance (RSF). Based on the findings, the study recommends that the Central Bank of Nigeria (CBN) should closely monitor and manage changes in the MPR to promote, and improved bank performance. Although the effect was not statistically significant, its positive direction suggests that MPR adjustments could impact shareholder returns over time. Furthermore, since interest rates showed a weak yet positive influence on RSF, regulatory agencies are encouraged to strengthen the effectiveness of interest rate policy transmission. This includes enhancing the linkage between policy rates and banks’ lending behavior to ensure monetary policy decisions have a more substantial impact on overall bank performance.
Keywords
Monetary PolicyInterest RateCash Reserve RatioReturn on Shareholder’s Fund
References
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